Some of the biggest trade publishers in the industry have grown even larger with recent acquisitions of other publishing companies, boosting their profit margins and cutting operating costs in one fell swoop. But you don’t have to be a publishing giant to benefit from this tried-and-true method of business growth. Some types of strategic acquisitions can make good sense even for small to midsize publishing enterprises — including yours.
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Kings of the Hill
As reported in Publishers Weekly, 2014 was marked by some major acquisitions among the biggest players in the trade publishing game. HarperCollins enjoyed a significant increase over its operating margins of the previous year, partly by acquiring Harlequin. Penguin Random House didn’t see an increase in profit margin, but it did achieve a big gain in earnings — and most of that gain was attributed to its acquisition of Santillana Ediciones Generales and its merger with Penguin.
It’s worth noting that the other three members of the industry’s “Big Five” (Lergardere Publishing, Houghton Mifflin Harcourt, and Simon & Schuster), none of which made any acquisitions, all suffered declines in their fortunes. The message there seems pretty clear — acquiring another business is still a valuable strategy for getting not only larger but also more profitable.
Smart Roads to Sensible Expansion
Smaller businesses, including trade publishers, sometimes place so much emphasis on the undeniable virtues of slow but stable growth that they overlook other, faster options. Their methods will certainly help them avoid disasters such as the recent implosion of GigaOm, which paid the price for using venture capital to grow too large too fast. But in some cases, controlled rapid expansion in the form of a strategic acquisition can make solid business sense even for small trade publishers.
What sort of acquisitions can a small to midsize publisher benefit from? Bear in mind that acquisition isn’t always about swallowing up competing publications; sometimes it’s a matter of creating a useful synergy between your company and the one being acquired. For instance, maybe you could really use the other publisher’s distribution network, while they could benefit from the cash infusion. Synergistic acquisition is a smart financial move if you gain some critical new tool for boosting your revenue or controlling your expenses.
If you’re like many other trade publishers trying to expand and refine their online marketing capabilities, maybe you should think about acquiring a company that offers those specialized skills and technologies in spades. A publisher looking to move heavily into social media and/or SEO, for example, might do well to create its own social media or SEO department overnight simply by acquiring a small but experienced social media or SEO company. It’s not just about growth; it’s about growing in the right directions to feed further, more organic expansion — investing in your success.
Small publishers can see another not inconsiderable benefit from acquisition. Since acquisition is considered a relatively low-risk means of expansion, your bank officer may be much more open to providing the necessary financing to fund the action. When you’re asked to justify the sales projections in your loan application, nothing beats being able to point to the sales figures of the company you’re acquiring.
Acquisitions can serve a powerful tool for growth and expansion for a wide range of publishers, not just the biggest industry leaders. Think hard about what new facilities, capabilities, or resources your publication could use most right now. It might just point you toward that smart acquisition that takes you to the next level!